Sri Lanka has only partially implemented the EDI system despite the fact that the Sri Lanka Automated Cargo Clearance System was initiated about six years ago. The progress to date has been poor, with more than 80 per cent of the CUSDECs still being processed manually. According to the interviewees, only about 35 per cent of the entire import/export process has been automated and most are not satisfied with the status of automation in the country. Unsurprisingly, automation has had a relatively small impact on the small and medium-sized traders and agents, and the benefits have been limited.
Currently, the EDI system only allows lodgement of the customs declaration form and receipt of approval. Thereafter, the process is entirely manual and still involves a large amount of paperwork and visits to different locations to import or export a good. In addition, there is the added cost involved in lodging the documents electronically, which some stakeholders thought was too high since they can only lodge the CUSDEC electronically.
Moreover, customs, the ports and BOI, which are the main organizations in the system, remain only partially connected while important components such as submission of manifests and shipping notes are still being tested and are not in commercial operation.
So far, only SLTB is connected to the system. Thus, linkages with the relevant government agencies are non-existent or weak at best.
Full implementation of the EDI system in Sri Lanka has been delayed due to a number of reasons. The main reason is the absence of an entity to drive and coordinate the implementation of the system. Ideally, it should be spearheaded by the Ministry of Trade, Commerce and Consumer Affairs. In addition, it is necessary to re-engineer the way a number of government agencies work in order to get them linked to the system.
However, computer literacy is one major obstacle to the adoption of the electronic system by government agencies. It must be noted that the success of the system hinges not only getting the required technology but also on being able to all agencies involved to adopt the system. In that regard, the service provider lacks a strategic plan. Consequently, Sri Lanka has only managed to automate part of the import/export process while a substantial portion of the process remains manual. Therefore, Sri Lanka has a long way to go before trade facilitation is fully automated similar to the systems in Singapore, the Republic of Korea and Dubai, United Arab Emirates.
Policy recommendations for the Government, customs, other agencies and the service provider on developing automation of the export/import process are given below.
Although some recommendations target the SME sector directly, since Sri Lanka is still at the initial stage of implementing the EDI system, many of them are applicable to all enterprises irrespective of their size.
1. Government, Sri Lanka Customs Authority, government agencies To increase or even just maintain Sri Lanka’s export competitiveness and its trans-shipment position within South Asia, it will be necessary to accelerate the implementation of the EDI project. In this regard, it will be necessary to link up with all concerned, including government and private institutions, as this will eventually allow the country to move towards a single electronic window. This will encourage SMEs to use the electronic system, since the import/export processes will be fully automated.
As linking all the government and private agencies simultaneously might be too ambitious, it will be necessary to first prioritize a few selected important stakeholders and link them up, and thereafter get others to join the system at a later stage. The SME respondents were of the view that linking not only customs, BOI and the ports but also Sri Lanka Standards Institution, Import and Export Department, the Cosmetics Devices
and Drugs Authority, the Telecom Regulatory Commission and the Ministry of Health would be beneficial to them. Strong support needs to be provided, especially to government agencies, to ensure that they are able to link up with the system. Therefore, it will be necessary to re-engineer the way a number of government agencies work. This will require the provision of not only software and hardware but also training of staff within the agencies on how to use the system.
There is also the need to ensure that the service provider is capable of linking all concerned and that it has the required technology as well as the necessary financial and human resources. Given the slow progress made to date, many of the stakeholders – including CHAs/freight forwarders and the garment industry – have little or no confidence in the present service provider and its ability to implement the system fully. Some respondents strongly suggested that the market be opened up, as this would pave the way for more efficient and technologically superior service providers to offer a similar service.
However, some of the respondents also pointed out that this would make little difference unless all the institutions were willing and capable of linking up with the system.
The full implementation of the EDI system and linking all concerned to the system is a challenge. In this process, customs can play a crucial role. However, the interviews with SMEs and others revealed that corruption in government institutions is one of the biggest impediments to implementing the system. This fact was also highlighted by Transparency International Sri Lanka (2008), which noted that “EDI would speed up processing, reduce workloads, improve documentation, save time and result in much greater efficiency for all parties. But it would also undermine prevalent and predictable forms of corruption that have long existed in the Customs Department”. Some SME agents were of the view that unnecessary delays were created at certain points of the import/export process in order to discourage traders/agents from using the EDI system.
For customs or the Government to develop the EDI system fully, it will be necessary to establish a proper database of the users. These forms of data/information are essential in making meaningful changes to the current system and promoting EDI in the country.
Therefore, the authorities will need to address the current vacuum in data availability.
In migrating to an automated system it is vital that the necessary supportive legislation and infrastructure facilities are in place. Some SMEs as well as the large-scale agents/traders felt that it would be necessary to enact the necessary legislature to make automation compulsory so that everyone would need to process import/export documents and other allied documents electronically, including a deadline for full migration to an electronic system. Infrastructure facilities such as an uninterruptible power supply should also be developed; for example, a breakdown of the electricity supply in the country could upshot down the trading process if it was done entirely through EDI, thus resulting in huge losses. Larger firms would be better placed to address such situations (e.g., access to generators); the small-scale players, who do not have access to such equipment, would mainly be the ones most adversely affected.
In order to implement the above recommendations, it will be necessary for the Government to take an active interest in this initiative and the efforts towards full
implementation of the system. All those interviewed said it would be necessary for the Government to take the lead in developing the system. Some interviewees suggested setting up an inter-ministerial committee, with participation by the private sector, headed by the Minister of Trade or even the President, given the importance of the project to the national economy.
2. Service provider
Many of the SMEs interviewed were not using EDI but were keen to try out the system. The lack of resources does not appear to be a major obstacle to migrating to an electronic system. However, there is a wide lack of awareness of the system in the SME sector, especially with regard to the benefits and costs. Many SMEs have not been approached by the service provider or any other organization. There is clearly no organized method of disseminating information to them. In this context, the majority of the SME traders/agents highlighted the importance of raising awareness of the EDI system and other trade-related information that affected them. Customs should take the initiative, together with the chambers/industry associations, in developing a system of coordinated information dissemination in order to reach out to the SMEs. The EDI service provider can also take a lead role in increasing awareness by educating SMEs. As one SME respondent suggested, providing non-EDI users with a free trial run of the facility would introduce them to the system and encourage them to use it after experiencing the benefits first-hand.
In order to encourage greater participation in the benefits of an automated system by the SMEs, EDI centres with computer facilities should be set up in and around Colombo as well as in other urban areas. A proposal has been put forward along these lines, but no action has materialized to date. The service provider should take the initiative in setting up these centres.
Some stakeholders were of the view that EDI was out-dated technology and that greater emphasis should be placed on web-based technologies such as XML/UNeDocs.
Therefore, the current service provider should assess the most suitable technology for the country.
References
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Hettiarachchi, K. (2008). “Competitiveness hindered by lack of concern”, The Island – Online. Colombo. Available at www.island.lk/2008/07/14/business5.html
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Available at www.dailynews.lk/2007/11/20/bus01.asp
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